Brexit: How To Manage VAT & Customs

Brexit: How To Manage VAT & Customs

Published: 03/02/2021

The UK is now out of the EU Customs Union and EU VAT regime, resulting in new VAT and customs obligations on eCommerce sellers with UK or EU consumers. These apply whether selling on your own website or through marketplaces like OnBuy. At Avalara, we’ve put together a checklist for UK and EU sellers which reveals the most important steps to take now.


VAT for UK Sellers

UK Sellers

1. Do you need extra VAT registrations to continue selling?

If you are selling your goods to EU customers under any country’s VAT distance selling threshold (€35k or €100k), then you will need to VAT register in each country or lose the right to sell. You can no longer use your VAT number to sell to UK customers if your sales are below £70k. You will need a UK VAT registration.

2. Will you incur major VAT fines if you don’t appoint a Fiscal Representative?

Under local country rules, you may need to appoint a special VAT agent, a Fiscal Representative. This applies in up to 19 EU states.

3. Will your customers get a nasty import VAT surprise?

You must choose who pays the import VAT and review your delivery terms (‘Incoterms’) for your customer’s benefit. Some EU states offering deferred import VAT.

4. Selling digital goods? Have you re-applied for a MOSS return?

You are no longer be able to use the single MOSS return filing to HMRC to declare your sales to EU consumers. You must no register with any other EU27 member state and file with them. You will need a new UK VAT registration to declare your sales to UK consumers. You can no longer use your MOSS single registration.

VAT for EU Sellers

EU

1. Do you need extra VAT registrations to continue selling?

You can no longer use your VAT number to sell to UK customers if your sales are below £70k. You will need a UK VAT registration.

2. Will you incur major VAT fines if you don’t appoint a Fiscal Representative?

The UK will not require you to appoint of a Fiscal Representative.

3. Will your customers get a nasty import VAT surprise?

For sales below £135, you will have to charge import VAT at the checkout and pay through a UK VAT return. Otherwise, a UK postponed VAT scheme available through the right application. 3. Will your customers get a nasty import VAT surprise?

4. Selling digital goods? Have you re-applied for a MOSS return?

You will need a new UK VAT registration to declare your sales to UK consumers. You can no longer use your MOSS single registration.


CUSTOMS Keeping your goods moving

CUSTOMS Keeping your goods moving

1. Have you got UK and EU EORI numbers to clear goods?

Without an Economic Operator Registration Identification number, you are not able to clear goods with customs to send to your EU or UK customers. You need two: a UK and an EU EORI number.

2. Have you the right commercial terms for your customer?

To avoid upset customers and customs holding up your goods, you have to rethink the delivery terms (‘Incoterms’). These clarify who is responsible for customs clearance and paying any tariffs and import VAT.

3. Ready to complete customs declarations?

You have to complete exit and entrance customs declarations on goods for UK and EU customs. There is a potential six-month deferment for UK declarations.

4. How will you pick the right commodity code?

The customs declaration needs all goods to have a standardised commodity identification code (HS Code). If you get this wrong, you will under/overpay any tariffs and have your goods blocked by customs.

5. Will you pay the tariffs?

Whilst there is now a preferential tariff agreement between the UK and EU, this requires you to follow the new ‘rules of origin’ requirements. This means obtaining a ‘statement of origin’ from the exporter or self-certifying.


Should I be shipping my goods DAP (delivered at place) or DDP (delivered duty paid)?

Keeping your goods moving

UK suppliers in particular are fast moving to DDP because they fear losing EU customers to EU-resident suppliers who do not face the new customs declarations, potential tariffs and import VAT charges. But this can bring many admin and import tax challenges:

  • The importer will need a UK and EU EORI
  • The importer will have to complete customs declarations - although the UK has given a six-month deferment
  • Also, the importer will have to identify the right customs commodity code to avoid over or under paying any tariffs
  • Import VAT, which can be avoided through Postponed VAT Accounting (PAV) in the UK and deferred import VAT in the EU
  • UK businesses may need to appoint an EU fiscal representative in different member states for VAT registrations
  • Requirement to appoint an indirect Customs representative to act as the import declarant

Need help with your UK or EU VAT compliance?

Need help

Researching VAT legislation is the first step to understanding your VAT compliance needs. Avalara has a range of solutions that can help your business depending on where and how you trade. Contact us at www.avalara.com/onbuy